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Relaxed regulatory scrutiny won’t stop companies like Apple Inc. and Intel Corp. from
reporting as usual next month about efforts to keep minerals that fund conflict in
Africa from ending up in computer chips, jewelry and other products.

Companies still face supply chain pressure from consumers, investors and each other,
even though those that only provide basic disclosures on where they think the minerals
in their products come from
won’t get in trouble with the Securities and Exchange Commission. Detailed disclosures on “extensive and
costly” due diligence are now essentially considered optional
in the eyes of the commission’s acting chair.

“It’s like looking at the tag on your shirt or shoes,” Carly Oboth, a policy adviser
on the conflict resources team at the nonprofit Global Witness, told Bloomberg BNA.
“It tells you where it’s made, but it doesn’t give any details on how it was produced.”

The commission’s rule requiring annual conflict minerals reporting, which until recently
had spent years in court, has been an early target of the Trump administration’s deregulatory
agenda because it is seen as cumbersome and not relevant to securities regulation.
Federal research shows the majority of companies doing due diligence are still unable to confirm the
origin of tin, tantalum, tungsten or gold in their products or whether the minerals
benefited or financed armed groups in the Democratic Republic of Congo and neighboring
countries.

The SEC’s April 7 comments will have
little impact on this year’s work to trace the minerals because it is likely to be complete or
nearly complete by now at most companies. But they could affect what companies’ disclosures,
due at the end of May, will look like.

Eyes on Filings

The commission
isn’t the only audience for those disclosures. “We’ll continue to call for transparency
on this issue and call out companies who roll back their own reporting just because
the SEC isn’t asking for it,” said Patricia Jurewicz, director of the Responsible
Sourcing Network, which
ranks companies each year based on their reporting.

Some companies, including Apple and Intel, will file as planned. Intel’s work to become
a ‘
conflict-free’
company started before the Dodd-Frank Act mandated reporting, and the company
says it will carry on regardless of regulation. Apple, one of the first companies to
map its mineral supply chain from manufacturing to the smelter level, made a similar
pledge, as did
Tiffany &
Co
.

Others may take the SEC’s statements as “an excuse” for not filing or for filing less
information, Lauren Compere, managing director at Boston Common Asset Management,
told Bloomberg BNA. Boston Common is part of a group of investors managing close to
$5 trillion in assets that came to the rule’s
defense after the SEC and the White House first
made moves toward rolling it back.

“If I were the CEO of a publicly traded company, I wouldn’t take that chance,”
said Jennifer Kraus, co-founder and chief scientific officer at supply chain data
and analytics provider Source Intelligence. With the filing deadline around the corner,
Kraus said the consensus among her customers is to stay the course.

More to Come?

The disclosure requirement has faced criticism—and a lawsuit—from the National Association
of Manufacturers and other trade groups for making companies say if their products
haven’t been found to be ‘conflict-free.’
That part of the rule was struck down and, now that the lawsuit has officially ended,
it was sent back to the SEC.

Acting Chairman Michael Piwowar, a Republican, has
told SEC staff to prepare a recommendation on what to do next that takes into account
comments he asked for earlier this year. His “de facto rulemaking”
has been slammed by the commission’s only other member, Democrat Kara Stein. “It represents
a troubling attack not only on the commission process, but also on the restraints
of government power,”
she said in a statement.

The State Department is also
looking into how best to support responsible sourcing of conflict minerals.

Some companies may hold off on making major adjustments to their due diligence programs
for conflict minerals “until they gain more certainty on legal requirements going
forward,” said Leah Butler, who directs the Conflict-Free Sourcing Initiative. The
initiative helps companies and their suppliers with conflict minerals reporting and
auditing of smelters and refiners.

To contact the reporter on this story: Andrea Vittorio in Washington at
avittorio@bna.com

To contact the editor responsible for this story: Yin Wilczek at
ywilczek@bna.com

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